ireless payments have been "just around the corner" for almost eight years. But now, at last, they have arrived. Recent advances in wireless communications technology have greatly expanded the reach and reliability of wireless payments. Essentially, if your cell phone works in a location, wireless payments should also work there.

A market worth pursuing

Contrary to the predictions, wireless payments have developed into a niche market rather than a payments revolution. There are four reasons for this:

• Wireless communications costs have not undercut landline communications costs.
• Landline reliability still surpasses wireless communications. (How many landline disconnects have you had recently versus dropped cell phone calls?)
• The transaction speed of Internet-protocol (IP) connectivity matches or exceeds that of wireless, and IP is more reliable.
• Although the cost of mobile wireless terminals has come down, they remain expensive.

Still, wireless payments comprise a sizable niche well worth pursuing. So how do ISOs and merchant level salespeople market to this blossoming mobile payments market? Look for businesses that accept payments at varying locations; at locations without phone lines, Internet connections or electricity; or anywhere else conventional terminals don't work.

Service companies and businesses that deliver products are examples of enterprises with varying POS locations. These include pizza delivery, furniture sales, plumbing, appliance repair, house painting, home party sales, roadside assistance, limousine and shuttle services, and mobile car detailing. Certain businesses in fixed locations can also take advantage of mobile wireless payments: temporary, holiday-POS setups; restaurants; and arenas, for example.

Many POS locations have limited or no power and/or phone connections. Obvious examples are flea markets and craft fairs. But others also fit this category; for example, outdoor recreation facilities, campgrounds, paintball areas and street fairs. Take a good look at businesses you patronize; they may be ripe for wireless payments' benefits.

Pitch it right

Once you have identified prospects, there are three essential benefits to zero in on when pitching wireless: convenience, lowered transaction costs and reduced losses. I put convenience ahead of saving money because if you can sell a merchant on the convenience of wireless payments, the economics become secondary. While if you sell based on economics, then economics must justify the wireless terminal's significant cost. This is no small challenge.

Convenience: This can apply to merchants, their customers or both. If merchants are currently unable to accept credit cards, implementing bankcard acceptance with a wireless terminal can be a huge convenience. I recently contracted for a home inspection; payment options were either cash or check. Of course, I was selling the home inspector on the virtues of bankcard acceptance: increased business, no returned checks, etc. I was selling convenience, not economics.

Lower transaction costs: Many candidates for wireless payments are accepting credit cards but paying the higher card-not-present rate. The real-time authorization and signature capture that wireless technology provides can qualify merchants for the significantly lower card-swiped rates. This is straightforward; the key is to be able to offset the cost of the wireless terminal.

Let's assume that the difference between a merchant's card-swiped and MO/TO rate is 50 basis points, and the price of the wireless terminal is $750. If the merchant's business processes only $1,000 per month in wireless bankcard transactions, it will take 150 months to break even on the terminal purchase. If the merchant processes $10,000 per month, the break-even point is 15 months. At $100,000, it's only 1.5 months.

As you can see, the time it takes to realize savings is dependent on the volume of bankcard business. This is a significant obstacle because most candidates for wireless payments are low-volume merchants.

Acceptance of PIN debit via wireless can also reduce transaction costs. Typically, for merchants with average tickets greater than $50, PIN debit is less expensive than signature debit. The greater the average ticket, the greater the savings. PIN-based debit requires that customers swipe cards and enter PINs. Thus, remote merchants can only accept PIN debit if they have wireless terminals.

Reduced losses: When merchants are experiencing significant chargebacks and/or declined transactions, the terminal expense is much easier to justify because the savings are the actual value of those transactions. Chargebacks can be successfully defended when merchants have signed receipts showing the cards were present. If merchants aren't experiencing significant chargebacks or declined transactions, this benefit is not going to be attractive.

The market for wireless payments is rapidly expanding. The technology still has quirks; it's not yet mature; and merchants will need your help. Learn from the bumps in the road. You will become more skilled in selling wireless payments and well positioned to take full advantage of this opportunity.

Ken Boekhaus is Vice President, Marketing and Business Development for Electronic Exchange Systems, a national provider of merchant processing solutions. Founded in 1991, EXS offers ISO partner programs, innovative pricing, a complete product line, monthly phone/Web-based training and quarterly seminars. For more information, please visit EXS' Web site at www.exsprocessing.com or e-mail Boekhaus at kenb@exsprocessing.com . EXS is a registered ISO/MSP for HSBC Bank USA, National Association.